Employment and online education group, SEEK Limited (ASX: SEK), delivered a weak FY20 result this morning, but not unexpectedly – job advertising in a pandemic isn’t easy.
At the time of publishing, the SEEK share price has tumbled around 10% with shares last trading at $19.36. Here’s my take on the results.
SEEK hit hard by COVID-19
Despite an incredibly difficult second half of the financial year, the company reported a 3% increase in revenue to $1.57 billion.
Management continues to target $5 billion in revenue, but this has been pushed out beyond the original FY25 target. Regardless, this sort of foresight and initiative is what has driven SEEK’s growth for many years.
The Australian business was hardest hit, falling 12% with billings bottoming at 65% of 2019 levels, whereas the Chinese Zhaopin business remains the leader, adding 12%.
The board is now forecasting a reasonable 2021, but with earnings to remain below 2020 peak levels.
The company managed to stay cash flow positive even throughout April and May, finishing with a net profit of $90.3 million, down 51% on the prior year. This was reduced to a statutory loss of $111.7 million due to the downward revaluation of SEEK’s investments in Latin America and Asia.
Importantly, cash flow remains solid, albeit below 2019 levels, with $409 million being received.
The highlight in 2020 has been the growing Online Education Services, which includes an investment in Coursera. The business unit grew 7% in 2020 and is likely to benefit from the COVID-19 tailwind of re-skilling and the need for online education courses for new employees.
Will SEEK pay a dividend?
Unfortunately for income investors, as SEEK flagged earlier in the month, the company has decided to cancel its final FY20 dividend.
The decision came in an effort to avoid a discounted capital raise and to focus on the company’s continued investment and development opportunities.
SEEK is a buy in my books – the result was as expected for a business directly exposed to the pandemic. In my view, the dividend cut is a prudent decision and management’s growth focus will pay off in the longer term.
To read more about SEEK’s FY20 report, including the company’s outlook for FY21, check out this article from Rask Media’s Jaz Harrison: SEEK (ASX:SEK) shares sent 12% lower on FY20 result